R&D credits 'wasted by half of businesses'

News Article - 15 January 2007
Category: Business

Half of the chancellor's £580 million budget for research and development (R&D) tax credit is not being put to good use because companies are claiming the cash for projects which they already planned to carry out, it has been revealed.

The Treasury released evidence to this effect through the results of a survey which was made known to the shadow chancellor George Osborne under the Freedom of Information Act.

According to the results, half of those businesses which had successfully claimed for R&D tax credits found that it had not had an impact upon R&D spending or the projects themselves.

"Gordon Brown boasts about his R&D tax credits, but his own department has been forced to admit that half of the money spent on them is wasted," said Mr Osborne.

"While the chancellor spins, our competitiveness has slumped."

Laura Abramovsky of the Institute of Fiscal Studies told the Observer however that it was too early to be able to judge whether the scheme was having a positive or negative impact.

However, in countries where R&D systems had been in place for a number of years, evidence of their effectiveness had been proven and additional expenditure had been generated, she added.

According to HM Revenue and Customs, the aim of R&D tax credits is to generate greater spending to "promote investment in innovation".

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